WIP in Software Industry

This query is : Resolved 

10 March 2008 1)The duration of project in Software Industry normally is more than a year. AS-7 allows only completed contract method.In such scenario where the comapany cannot raise a invoice till the completion of the contract, but it has incurred some expenditure till the end of the year in performance of the contract, how does it deal with expenditure already incurred?

Is there a concept of 'WIP' in Software Industry?. I have not come accross 'WIP' in reports of IT companies.

2)If the company has received some advance based on milestones achieved, can this sum be deducted from expenditure already incurred and show remaining balance as WIP?

Kindly clarify.

10 March 2008 I think AS 7 will be applicable only to the following:

For the purposes of AS 7, a construction contract is a contract for the construction of an asset or of a combination of assets which together constitute a single project. Examples of activity covered by such contracts include the construction of bridges, dams, ships, buildings and complex pieces of equipment.

In view of this urs would be more of 'inventory' in nature.

It would be worthwhile for more learned colleagues to give their views.

12 March 2008 Thanks for letting me know that AS-7 is not applicable to the case I have mentioned.

I request other learned members to kindly express their views on the subject.


27 May 2008 u have to assume some % of exp. incurred on that software and treat that cost like wip. like how much time a person devoted to that project then proportionate amt of his salary will go to wip.

advance will not be deducted and will be shown in liablity side.

28 May 2008 Thanks for your response.

Why is it that in the Finalised Accounts of companies like Infosys we do not find WIP?

28 May 2008 in b/s of infosys if u see in loans and advances, they provide for unbilled revenue, it is actually wip



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